The government on Monday retained its assessment of the Japanese economy as recovering moderately despite some stalling, taking a more upbeat view on production after output picked up following a drop due to a data-rigging scandal in the auto sector that dragged on economic growth.
The Cabinet Office said moderate economic growth will continue, but warned of the negative effects of inflation, the conflict in the Middle East and developments in currency and other capital markets.
"Industrial production shows signs of picking up recently, although manufacturing activities declined due to the effects of suspending production and shipments by some automotive manufacturers," the monthly economic report said, in its first upgrade in a year.
Japan's economy contracted an annualized real 2.0 percent in the January-March period, marking the first negative growth in two quarters. But economists expect a rebound in the April-June quarter.
Rising prices of everyday goods dented private consumption, which makes up over half of the economy, while a safety data scandal at Daihatsu Motor Co., a Toyota Motor Corp. unit, led to production at some of the parent's group firms being halted temporarily, affecting the wider auto industry.
"The Japanese economy is recovering at a moderate pace, although it recently appears to be pausing," the report said, with the government using the same expression for four months.
Most of the assessments on key components of the economy were retained, from private consumption, business investment and exports.
But the government lifted its view on imports for the first time since April 2023, citing increased shipments from the United States and Europe, with its assessment on public investment also upgraded as the government ramped up spending on public works.
Private consumption and exporters appear to be "pausing for picking up" while business investment shows "movements of picking up," the office said.
The government changed its wording on corporate goods prices, which affect consumer prices with a lag, to "rising moderately" from "flat" in the previous report. It was the first change in eight months.
